Correlation Between Capricor Therapeutics and Fate Therapeutics

Can any of the company-specific risk be diversified away by investing in both Capricor Therapeutics and Fate Therapeutics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capricor Therapeutics and Fate Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capricor Therapeutics and Fate Therapeutics, you can compare the effects of market volatilities on Capricor Therapeutics and Fate Therapeutics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capricor Therapeutics with a short position of Fate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capricor Therapeutics and Fate Therapeutics.

Diversification Opportunities for Capricor Therapeutics and Fate Therapeutics

0.05

Correlation Coefficient

Capricor Therapeutics  Fate Therapeutics

Significant diversification

The 3 months correlation between Capricor and Fate is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Capricor Therapeutics and Fate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fate Therapeutics and Capricor Therapeutics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capricor Therapeutics are associated (or correlated) with Fate Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fate Therapeutics has no effect on the direction of Capricor Therapeutics i.e., Capricor Therapeutics and Fate Therapeutics go up and down completely randomly.

Pair Corralation between Capricor Therapeutics and Fate Therapeutics

Given the investment horizon of 90 days Capricor Therapeutics is expected to generate 0.97 times more return on investment than Fate Therapeutics. However, Capricor Therapeutics is 1.03 times less risky than Fate Therapeutics. It trades about -0.15 of its potential returns per unit of risk. Fate Therapeutics is currently generating about -0.24 per unit of risk. If you would invest  1,906  in Capricor Therapeutics on September 27, 2024 and sell it today you would lose (505.00) from holding Capricor Therapeutics or give up 26.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Capricor Therapeutics  vs.  Fate Therapeutics

Capricor Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capricor Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Capricor Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fate Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Capricor Therapeutics and Fate Therapeutics

The main advantage of trading using opposite Capricor Therapeutics and Fate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capricor Therapeutics position performs unexpectedly, Fate Therapeutics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fate Therapeutics will offset losses from the drop in Fate Therapeutics' long position.

The idea behind Capricor Therapeutics and Fate Therapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.